April 29, 2020 / 8:39 AM / a month ago

Techcombank makes stellar debut

* Loans: Vietnamese lender scores in syndication with largest first-time bank borrowing

By Mirzaan Jamwal

SINGAPORE, April 29 (LPC) - Vietnam’s Techcombank impressed with its debut in the offshore loan market, raising US$500m from two dozen lenders and demonstrating the strength of demand for some new credits as loose monetary policy fuels liquidity in the banking market.

The three-year loan, which is the largest for a first-time Vietnamese bank borrower, received a blowout response with 19 banks joining the five mandated lead arrangers, underwriters and bookrunners in general syndication.

Lenders were attracted to its rarity value and pricing, despite the risk-off environment caused by the coronavirus pandemic.

When Techcombank’s loan launched in mid-February, there was little of interest in the market.

“There was limited deal flow caused by the pandemic and (lenders had) excessive liquidity,” said a Taiwan-based loan banker.

The outcome is all the more remarkable given how other financial institutions have struggled to raise loans because of the Covid-19 fallout.

In early April, Macquarie Group closed a debut five-year Ninja loan at a reduced size of US$300m and sweetened pricing of 120bp over Libor, having originally targeted US$400m at a 100bp margin.

State-owned Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) closed a US$120m one-year refinancing in mid-January with just two banks joining in limited syndication. The lacklustre response came even before market conditions took a turn for the worse as the pandemic started to spread across Asia.

As a debut borrower Techcombank, formally known as Vietnam Technological and Commercial Joint Stock Bank, offered a pricing premium compared to its peers. In contrast, spreads have tightened for repeat bank borrowers from Vietnam as lenders have grown more familiar with these credits.

“Most of the (bank borrowers) are priced at the low hundreds, which might be a bit too low for some of the retail banks, whereas Techcombank would still be above lenders’ cost of funds at the time they committed,” said a Singapore-based syndications banker.

Techcombank’s loan offered top-level all-in pricing of 163bp based on an interest margin of 150bp over Libor.

That pricing was attractive when it launched, but in today’s market it would likely be higher, as lenders are facing higher funding costs due to increased market volatility, the Singapore-based banker said.

In comparison, BIDV, a well-established borrower, completed its one-year loan in January at a margin of 75bp over Libor.

In November 2018, BIDV closed a US$300m dual-tranche loan that paid an all-in of 130bp based on a 110bp margin for the three-year portion. In August of the same year, it wrapped up a US$150m three-year bullet loan that paid a top-level all-in of 137bp based on a margin of 117bp over Libor.

SAFER BET

Lenders were keen to support Techcombank, which is one of Vietnam’s biggest privately owned banks and rated Ba3/BB− (Moody’s/S&P). Its total assets increased 19.5% to D383.7trn (US$16.3bn) in 2019.

Vietnam’s syndicated loan market was one of only a few to achieve meaningful growth in 2019, as lenders sought diversification away from the larger Indian and Indonesian markets. Syndicated loans for Vietnamese borrowers doubled from 2018 to US$7.71bn, according to Refinitiv LPC data.

“Borrowings from Vietnam carry much higher pricing than similarly rated Indian or Indonesian credits,” another Taiwan-based loan banker said.

“Usually, banks are under more strict supervision than non-banking financial companies, and they are much safer as we are turning towards a more conservative strategy.”

The bank’s shareholders include private equity firm Warburg Pincus and Vietnamese conglomerate Masan Group, which added to the deal’s appeal.

Vietnam is also one of the countries least affected by the coronavirus outbreaks in Asia, with only 270 confirmed cases and no death as of the middle of last week.

While several banks and non-bank lenders from Asia have tapped the loan markets this year, only Bank Negara Indonesia has achieved a similar outcome to Techcombank. The Indonesian state-owned bank wrapped up a US$970m dual-tranche loan in early February with 28 banks, 23 of which joined in general syndication.

The deal was launched in mid-November as a US$750m dual-tranche loan offering top-level all-in pricing of 93bp and 106.6bp based on margins of 75bp and 90bp over Libor for the 3.5 and five-year tranches, respectively.

Reporting By Mirzaan Jamwal; Additional reporting by Evelynn Lin; Editing by Chien Mi Wong, Prakash Chakravarti and Steve Garton

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